Contemporary Capitalism: Neoliberal Capitalism, Financialized Capitalism, or Globalized Capitalism?

[marmar]

By David Kotz, a professor of economics at the University of Massachusetts-Amherst and the author of The Rise and Fall of Neoliberal Capitalism (Harvard University Press, 2015). This is the second installment of a two-part series based on his book; see the first post here. Originally published at Triple Crisis.


While it is widely agreed that capitalist economies underwent significant change after around 1980, there are different interpretations of the new form of capitalism that emerged. There is no agreement about the best organizing concept for post-1980 capitalism. Some view it as financialized capitalism, some as globalized capitalism, and some as neoliberal capitalism. These different conceptions of contemporary capitalism have implications for our understanding of the problems it has produced, including the financial and economic crisis that emerged from it in 2008. Focusing on the U.S. economy, I presented a case in part 1 that “neoliberal capitalism” is the best overall concept for understanding the form of capitalism that arose around 1980. Here, I deal more specifically with the shortcomings of alternative interpretations – focused on the concepts of “financialization” and “globalization,” respectively.

Why Not “Financialization”?

Some economists view “financialization” as the best overall concept for understanding contemporary capitalism. Financialization can best be understood, however, as an outgrowth of neoliberal capitalism. The rise in financial profit, which gave the financial sector a place of growing importance in the economy, came quite late in the neoliberal era. As figure 2 shows, only after 1989 did financial profit begin a long and steep climb, interrupted by a fall in the mid 1990s, and then a sharp rise to a remarkable 40% of total profit in the early 2000s. It was only in the 2000s that financialization fully blossomed. At that time, commentators noted, Wall Street was beginning to draw a large percentage of elite college graduates.

The “financialization” of the U.S. economy in recent decades, important though it is, was itself driven by neoliberal restructuring. The neoliberal institutional structure, including financial deregulation, enabled financial institutions to appropriate a growing share of profits. Furthermore, financialization cannot account for many of the most important economic developments in contemporary capitalism. It cannot explain the dramatic shift in capital-labor relations from acceptance of compromise by the capitalists to a striving by capitalists to fully dominate labor.. It cannot explain the sharp rise in inequality. And it cannot explain the deepening globalization of capitalism.

Why Not “Globalization”?

Like financialization, “globalization” has been presented by some analysts as the best framework for understanding the contemporary form of capitalism. Capitalism has, indeed, become significantly more integrated on a world scale in recent decades, including the emergence of global value chains and a truly global production process in some sectors.

The degree of globalization of capitalism has gone through ups and downs in history. Capitalism became increasingly globalized in the decades prior to World War I. Then the cataclysm of two world wars and the Great Depression reversed the trend, and capitalism became less globally integrated over that period. After World War II, the process of globalization resumed, gradually at first. Around the late 1960s, globalization accelerated somewhat measured by world exports relative to world GDP, as figure 3 shows. After 1986 the trend became more sharply upward. Thus, in contrast to financialization, which emerged later than neoliberalism, the globalization process in this era began before neoliberalism emerged, although globalization accelerated in the neoliberal era, particularly after 1990. ...................(more)

http://www.nakedcapitalism.com/2015/09/contemporary-capitalism-neoliberal-capitalism-financialized-capitalism-or-globalized-capitalism.html